Tesla is the future of the car. It has pioneered the 21st-century electric vehicle (EV), and it’s leading the way to the self-driving car. Still, a lot of people simply don’t understand visionary founder Elon Musk’s dream. They keep trying to judge it by old manufacturing standards. They’re missing the point. Musk doesn’t want Tesla to be the next GM. He wants to transform the car industry.
Musk did a fine job of explaining it in 2006, and The Secret Tesla Motors Master Plan is still on track. “The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”
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Where is Tesla now in relation to that plan? It’s on course for the first $35,000 Tesla Model 3s to arrive on buyers’ driveways by late 2017.
At the same time, Musk is transforming the car industry. Chevrolet, a GM brand, delivered its first three Bolt models in December. These $37,000 cars don’t have Tesla’s pizazz, but they do have a Tesla-like battery range of 238 miles per charge.
Is Musk worried? Nope. He thinks Chevy isn’t making enough Bolts. GM will only be manufacturing 20,000 to 30,000 of the EVs. “Really, a car like that should be 300,000 to 500,000 per year for it to really make a difference,” said Musk.
Again, it’s not about beating GM, Toyota or Volkswagen. It’s about changing things once and for all.
Take superchargers. Today, given the scarcity of supercharger stations and the need to know ahead of time where to find them, you need to be a dedicated Tesla fan to make a long-distance trip, but those are exactly the people who buy them. Tomorrow, as Teslas become more affordable, there will be more supercharger stations. Tesla won’t be building all of them, though. Other EV companies will build them using Tesla’s open patents.
As more people buy EVs, the demand for a charging infrastructure increases. Companies that see an opportunity to fill that demand will use Tesla charging designs because they’re free. See where this is going?
We’ve seen this before. Remember the old parallel-printer interface, IEEE-488? HP invented it, and then it opened it for a nominal fee to everyone. Decades later, HP still makes most of its money from printers.
This is also yet another example of how open source can change the world. By opening up patents, the old proprietary world is left behind. Tesla is betting that by giving the world default standards, it will end up profiting. That’s a wise bet.
But the charging stations are just the beginning of what will be a virtuous cycle. The more charging stations, the easier it will be for potential buyers to rationalize buying EVs. That will help all EVs, but Tesla, the only major carmaker planning on delivering hundreds of thousands of EVs, will be the long-term winner.
Tesla has also set itself up to take advantage of a world where we charge up our cars instead of filling them up. In early January, Tesla started shipping the first batteries out of its Gigafactory. Tesla plans to sell 500,000 Model 3s by 2018. The Gigafactory is a major step forward in meeting that goal.
True, Tesla didn’t quite make its goal of 80,000 cars in 2016. But if you focus on that, you miss that the company’s total production of Teslas rose 64% year over year in 2016.
Here’s what I see. Tesla is, as it ever was, defying traditional business truisms. By dreaming big, using open-source principles and getting customer buy-in for Musk’s vision, Tesla will become the 21st-century car company. All the others will just be following Tesla’s tire tracks.